For couples with limited financial assets, a provision simply protecting their separate property could be beneficial. For example, both parties might be young and have small retirement accounts. They could establish the value of their retirement accounts at the time of the divorce and protect them from equitable distribution later on. They could agree that their respective retirement accounts will remain separate. Other financial accounts, such as stocks, savings accounts and other investments could be handled in a similar manner.
As for property division, parties can agree that no marital property will be created during a marriage and any property or funds acquired by a party remain his or her separate property in the event of a divorce. Alternatively, parties can designate certain assets as being a party’s separate property and “off limits”—assets such as a business, residence or financial account. Finally, the parties can agree on how marital property is divided in the event of a divorce and provide mechanisms to address future disputes about an asset’s valuation or about the division of illiquid assets such as real property or furniture.
What About The Kids?
While custody and child support are also major issues in most divorce cases, the court evaluates the best interest of the children at the time of a divorce for custody and the then-current incomes of the parties for determining child support. For these reasons, these items are not commonly found in prenups, since the terms may be disregarded or struck entirely.
Why Sign A Prenup?
By entering into a prenuptial agreement and “resolving” certain issues before a divorce, couples of any financial status can outline their own financial obligations, better understand their financial circumstances at the time of the marriage and outline how their financial responsibilities will be shared during their marriage.
For instance, a couple may decide to maintain separate banking accounts and provide for the protection of those accounts in a divorce. Conversely, the parties may decide to share financial accounts and address how the joint financial assets will be divided if the spouses part ways. The couple may establish provisions for calculating separate property, such as the value of a retirement account as of the date of the marriage or the down payment they made on a residence. The couple may decide how the title of an asset will affect the nature of the property.
For example, if one spouse owns a home before the marriage and wishes to add the other party to the title, the prenuptial agreement could specify that the home will remain the separate property of the purchasing spouse. While it may be uncomfortable to address these issues before the marriage, it spares the couples the emotional strain, financial expense and litigation costs if they split.
The Last Word
At a minimum, anyone who is contemplating marriage should speak with a domestic relations attorney and understand his or her rights. Even if the person is not independently wealthy or does not have significant assets, she may benefit from protecting the assets she does have or by establishing the way the finances will be managed during her marriage. Prenuptial agreements are not expensive, especially in comparison with the cost of a contested divorce. So two people who take the time to review each another’s finances before they marry will benefit in many ways, especially if they ultimately decide to end their relationship. If they remain married, they will appreciate the time they spent at the beginning of their marriage outlining their financial landscape.
Katie Kiihnl Leonard and Kevin J. Rubin are partners in the family law firm Boyd Collar Nolen & Tuggle in Atlanta. They may be reached at (770) 953-4300 or at [email protected] and [email protected].